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Worldwide Exchange

News/Business. Ross Westgate, Kelly Evans. Ross Westgate and Kelly Evans consider the business stories that have global significance. New.

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U.s. 37, Us 17, Washington 16, Italy 14, China 14, Spain 11, Europe 7, France 6, London 5, Hyundai 5, England 5, S&p 5, Moody 's 4, John Boehner 4, Sandy 4, John Lewis 4, Britain 4, Yolo 3, Ernst & Young 3, United States 3,
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  CNBC    Worldwide Exchange    News/Business. Ross Westgate, Kelly Evans. Ross Westgate and  
   Kelly Evans consider the business stories that have global...  

    January 3, 2013
    4:00 - 6:00am EST  

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hello. welcome to today's edition of "worldwide exchange." i'm ross westgate. these are the headlines. markets pull back from 20-month highs. a relief rally wanes out of a battle over the spending cuts and the debt ceiling. investors will start turning their attention away from this week's key economic data. we get a preview with the adp today. and another shot in the arm for china's economic recovery. services sector growth is at a four-month high in december thanks to the boost from construction work. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> okay. warm welcome to you. it's thursday, july the -- january the 3rd and we'll just
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recovering a little bit after yesterday's rally. german's december adjusted jobless rate, 6.9% from november's figure. and as forecast. that's where we stand at the moment. after very strong rallies yesterday, dow 2.64%. european markets up 3%. something more of a pause today. let's bring you straight up to how we check in asia. sichuan joins us from singapore. >> thank you, ross. china's latest official services pmi for december came in if a four-month high. this followed news earlier this week that put factory activity at a seven-month high. the construction sector was a key pick up. but transportation services showed weakness due to demand for china exports.
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the chinese recover is gaining traction. so the chinese markets will get a chance to react to the u.s. fiscal deal when it resumes trading tomorrow. elsewhere, a largely green day for asian bourses. the hang seng added .4% after % surge yesterday. industrial and consumer goods were cast by losses and utilities. elsewhere, the south korea kospi saw some profit taking ending down .6%. the automatic sector was also hit hard by the rising korean won with hyundai motor falling close to 5% today. sherry lass more on that coming up. meanwhile, australian miners continued to shine, pushing the asx 200 at a fresh 19-month high. this despite warnings the current rally and iron ore prices won't last. currently higher by .2%.
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>> sixuan, thanks for that. we're now into the trading session. to the down side a little bit more than five to four advancers being outpaced by decliners at the moment. but pretty even stevens. the stoxx european 600 up .25%. the fats fats 100 is down 0.07%. zacks down .12%. the dax up 29% last year. the ftse right now up 4 points. next this four, the dax off 9. at this bex down .8%. the ftse mib, down 50.1 points. we saw yields lower in italy and spain. a little higher today. nevertheless, spanish yields 5.05%.
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ten-year italian yields, 4.3%. treshy yields, 1.8%. dollar/yen this morning, 87.14. kind of where we were this time yesterday. saucy dollar/u.s. dollar 1.0503. doll sterling/dollar, 11.6236. euro/dollar, 1.3166. kind of where we were yesterday. asian markets in china and japan will be catching up on news on the u.s. fiscal cliff deal. we'll get december sales figures from japan's retailing. the owner of stores are set to release its q1 earnings today. samsung electronics is expected to post its q4 earnings guidance. that's all on the agenda in asia. but what investors are to do
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with what we've got so far this year? joining us now, nicholas. these are the classic risk off day yesterday. how do you categorize it and what it means for -- >> well, i mean, obviously, you know, i think it's important to be clear that this was a rally not based -- based not on what the deal did, but what the deal undid. clearly, the good news is that the u.s. americansfully avoided an even bigger fiscal issue. but, you know, i think clearly it shows how low we've actually sunk in the realm of investors expectations when the markets are actually rallying on essentially muddling through.
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and this is a well trodden path. it's a fairly familiar tale. and we've obviously seen it in the eurozone time and again. it's important -- it is important to say that we have averted what could have been a catastrophic fiscal sweep. and this is what the markets are focused on. the markets are focused on the growth picture. they're not focused or at least certainly for the near term, they're not focused on the debt path, on the debt picture, which is obviously what the agencies are focused on. >> well, for the moment, the rest of the world would still be happy to buy treasuries. >> absolutely. >> and that's the right assumption, isn't it? >> absolutely. and, you know, one could also say that, in fact, had there been no deals, they would have -- they would have plowed further into treasuries. but one cannot take this argument too far. that's simply the least dirty
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shirt argument, which obviously still holds. but the u.s. has already fallen off the cliff and it's been tumbling down for some time. that's not a fiscal cliff. that is a political cliff. a and, you know, this is a political system which is knee deep in partisan warfare. >> and the implication as we go into looking at the spending side and debt spending side, where does that lead-in investors ahead of the spending discussion? >> i was hearing a company yesterday saying most of the uncertainty has been lifted. i couldn't disagree more. over two-thirds of the republican party opposed this deal.
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speaker boehner clearly, i expect him to be re-elected. but he's lost control of his troops. and the republicans don't seem to be in any -- certainly not showing any willingness to compromise. they're now going to be even more emboldened. but the flip side of that coin is the republicans did cave at the 11th hour. if they caved of what is a relatively, relatively minor piece, it's spending which is the big. then, you know, there is the assumption that at the 11th hour, the republicans will fall into line. but i expect that to be extremely messy and to once again go down to the wire. and there's going to be an awful lot of volatility. >> okay. well, we'll talk about that because the vix is down 34% in the last few sessions.
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a historical drop. it's 2012 global industrywide insurance claims $65 billion. the 2012 claims cost the higher of that, as you might expect, caused by hurricane sandy. it's insured industry loss down from 2011 down to 119 billion. yesterday's resolution of the fiscal cliffhanger may provide -- but tend of this battle has fired the gun on a secondary gun on the spending cuts and the difficult growth ahead. >> just when you thought we were off the fiscal cliff, all of washington turns its attention one day after the fiscal cliff deal to the next fiscal cliff and that's going to be a fight over the debt ceiling coming in march. the treasury department has said it has some running room here to
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deal with the u.s. debt ceiling, but it will run out eventually, likely end of february or early march for that. and the deal that was just done here in washington did nothing about the so-called sequester, which is that dramatic series of spending cuts other than punt it for two months. that means early march will be another battle in spending in washington. if that's not enough, coming at the end of march will be a fight over what they call the continuing resolution. that keeps the american government financed and up and running. that runs out on march 27th which sets up another big battle over whether or not they can keep the government functioning here in washington, d.c. all of that is poisoning the atmosphere here in washington as people coming off this latest deal with bruised feelings and they know they have to go into another very tough negotiations. back to you. >> moody's ratings agency said the congress budget deal may not go far enough to prevent a credit downgrade in 2013.
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the company says the country's debt burden remains high and may not support a aaa rating without further deficit reductions. we saw yields because we have the big rally in stocks yesterday, we saw yields shooting higher. we're going to lower those a little bit. nick, we talked a lot about, you know, when do the bond vigilantes come on board, when do we get a big bond sell-off? we had some notable moves yesterday, but is that -- you know, are yields going to remain? are we at the upper end of the range on treasury? >> i certainly don't expect any sharp sell-off in treasuries. i think that yields will remain fairly -- fairly stable this year. obviously, we know there's been a lot of talk about a bond
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bubble and yields will inevitably climb at some stage, but i don't expect this to happen this year, not least because we're in for more volatility and quite possibly a very, very scary, scary, scary surprise come, you know, february. i think this is -- i think of this as only starting to come to grips with the severity of the dysfunctionlty of the u.s. political system. and italy, by the way, is giving the u.s. a run for its money or maybe if the u.s. is giving italy a run for its money. >> we're going to talk about italian politics. so, look, is 1.8%, 1.9% for ten-year treasury yields, is that the -- what's the top of the range, trading range? and when do you buy it, when do you sell them? >> i mean, i would expect the yields to rise a tad further. i don't think that we're at the
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top yet. we're pretty much there, right. we don't expect anything sharp. many do, but i certainly don't. >> okay. so you mentioned could europe be at loss of a japanese star? we'll speak to ernst & young about why that can be a yes.
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okay. here are some of the stoefrts we're following in asia today. playstation fans, it could unveil the latest version of its gaming console in february. they've stopped making older models. now it's set a precedent to february 25th. it's called destination playstation. a ps3 successor is on display. it's not expected to hit the shop until 2014. indian conglomerate tassa group has investments over the next two years. but the new chairman says he's continued tata's emerging markets in asia, latin america and korea. in south korea, hyundai motors hit especially badly today.
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sherry kang has more for us from seoul. >> happy new year to you, too. hyundai and kia motors are facing their biggest drops since they admitted to their fault and mileage claims back in early november. the korean won is what's behind these massive sell-off that's came in below the 1071 level in the previous session for the first time in 15 months. and we stayed below that level today, as well. and finance minister pasquel juan has been trying to talk down the currency, warning against the quote/unquote hurd behavior saying he will explore some sort of counter measures. and the weaker yen is giving the japanese automakers a leg up on the market. investors have been on the selling side for nine straight
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sessions, especially on sun day motors. and the company's conservative sales target for 2013 are not helping, either. hyundai and kia are looking to sell 4.3 million units this year when their 012 grew 8%. so they certainly have some work cut out for them this year. >> thanks for that. marine while, the currencies in europe are adding to the down beat mood. in italy, down to a 3 the-year low in 2012. the picture in france similarly poised with new car registration slumping by 14%. this comes as a report from ernst & young talking about a new lost decade with rising unemployment and stag nating growth.
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tom, thanks for joining us. it's not going to get knit better? >> no, i'm afraid 2013, at least from an economic point of view isn't going to get much better than 2012. unemployment is still very high and rising. there's a lot of uncertainty about the eurozone and how that will fare in 2013. also, there's a lot of fiscal policy, fiscal cuts to come to 2013, as well. >> still in portugal, they're raising taxes again. >> exactly. that's going to weigh on businesses, appetite to invest and to get out there and spend. on a positive note, 2012 did see quite a lot of radical policy action to keep intact. as long as we see that spirit around the eurozone and within this country -- >> we're still fighting fire, we're still trying to put out fire, right, keeping things
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together rather than to do anything to improve the underlying picture? >> well, no. a lot has been done in countries like spain to the competitiveness. and if you look at some of the -- >> and enormous social unemployment costs. >> absolutely, yeah. unemployment has been very high, but on the plus side, they are start to go make businesses more inclined to locate production. and we saw ford at the end of the last year announce that it was starting to move more production into spain. and that has to be a good sign from that point of view. >> do you see that as a climber of hope, nicholas? >> well, it's clear that the eurozone is a tale of two hearts. this is what we're seeing right now, basically. to a certain extent in the u.s., obviously it's a much, much brighter economic picture. the first up, obviously, is aggressive central bank policy
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action or at least the promise of it in the case of the ecb. and economies which are exhibiting varying degrees of weakness and, obviously, in the in the case of the per referee are experiencing outright depression or at least, you know, severe recession. investors right now are not focusing on these issues because we passed the fire fighting stage. seven words, believe me, it will be enough, has changed the picture. this is a completely different absolutely -- and i stress those seven words rather than the whatever it takes because, in fact, many eurozone policymakers have mentioned those words. those seven words have changed the picture fundamentally as far as sentiment is concerned. completely different from the
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mentals which your guest has just alluded to. clearly in the case -- >> when do the fundamentals, if they stay like this for a while, do the fundamentals come back and change sentiment? >> well, that's an excellent point. i don't believe that investors are stickily sensitive to italy's dire growth -- growth picture. they certainly weren't for years prior to the -- prior to italy succumbing to -- they're more sensitive now. what they're very sensitive to is whether there is a back stop in place. and there is a back stop in place. it's a virtual one for the time being, but it's working wonders. >> in the foreman of the ecb's -- >> yes. that is, of course, adding to the complacency. it's a double-edged southward. market sentiment is very much a double edged southward as we've seen in washington.
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>> we come to a circle in that if markets are better, is that lead to go any signs that the company is waiting to invest as a result? >> personally, i think investors are quite focused on what policymakers are doing in the first 456 of last year. it's starting to get italy moving in the right direction, albeit very slowly. but the decline in bond yield we saw in italy first up last year were in part due to the progress being made on the politics. in terms of how the move in markets and the willingness to invest, i think businesses look far more on what's happening with consumers, their ability to spend and also what governments are doing in terms of how they find their decisions. >> well, look, you've raised it. let's talk about it now. monti has been out this morning and he says the problem spread has fallen due to investor
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trends in italy and he hopes the trend continues. is that why bond spreads and fallen? >> with all due respect, i couldn't disagree more with your guest. the reason why bond spreads have fallen dramatically in the case of italy and spain has nothing to do with domestic policy reforms. and the proof is in the pudding. if you look at the rise, at the very sharp rise in italian and particularly spanish yields, let's say march when the ultra effect wore off and july 25th, this was essential ly due to th fact that investors were phased about a backstop. this was when mr. ma ohio and
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monti were implementing investor reforms. investors are sensitive mainly to whether, in fact, there is an ecb backstop in place and, in fact, whether the eurozone is going to -- >> what has to be triggered or not? >> well -- >> is it going to be triggered? if the back stop is improving sentiment, what is it that's ever going to trigger the back stop? >> this is a game of chicken. i believe that the ecb is absolutely prepared to intervene. whether the ecb really wants to intervene in spain bond markets given the problems, in fact, it's a heavily contingent one, a heavily political one. that is a separate issue. certainly italy is going to steer clear of this. >> well within i think it has to be a combination of both factors. without the rtos and without the bond buying for mario draghi last summer, we certainly
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wouldn't have seen the scale of decline in bond yields. at the same time, those enactments or certainly the bond buying program wouldn't have been achieved had there not been a radical improvement in the policy agenda in some of the at-risk countries. there has to be a combination of the two factors. >> before we let you go, very briefly, the italian election is coming up. how are investors going to traipse through that? >> certainly what we've seen here is a very interesting situation where clearly investors are expecting policy continuity irrespective of the outcome, or the parliamentary election in february. i suspect that investors have been lulled into a false sense of complacency with regard to italy and in particular spain. and the ecb is partly -- is partly responsible for that. what is the actual effects of
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the ecb's bond buying program, the signal effects. mr. monti has raised the stakes considerably. he's entered the xap. he's poe lit sized the campaign. he's allowed the campaign to center around his own economic agenda. >> nicholas, thank you very much, indeed. tom rogers, as well, from ernst & young.
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and these are the headlines from around the globe. equities pulling back in europe, looking for an encore stateside, u.s. investors will start turning their attention away from washington this week in washington politics. this week's key economic data, we have friday's jobs report. official pmi data put service sector growth at a four-month high in december, thanks to a boost in construction work. european equities closing in fresh 20-month high. the dax only 4% from its all-time high yesterday, slightly weaker this morning. not by much the ftse is still over the 6,000 mark.
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trying to see that for the first time since july 2011. yesterday, the cac down a bit more. the ibex down around 8%. on the bond markets, we saw an improvement on the yields in italy. that's improved slightly. still it's essentially lower than when we started. gilt yields continuing to rise up to 2% on the yield. on the currency markets, euro/dollar yesterday, we thought we might be headed towards 1.33. we're now below 1.32. dollar/yen steady at 87.111. we're joined by peter from saxo bank. thanks for joining us. it was a bit of a bang for the first trading day of the year. what happens next? >> yes. what happens next is a good question here. it seems like given the reaction from the market, the stock market, that people are gauging or expecting that we wouldn't have seen any deal. now we've got the deal so we saw
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a short-term rally. we're seeing that the stock market will probably phase from here and there is a potential risk that we could see a minor correction in equities over the next couple of months. we had the debt ceiling and the italian election and vels have uncertainty around the economy. so that's our best guess from here. >> and what sort of correction? let's take a look at the dax. we're only 4% -- it's amazing to see the close. only 4% off from the record high. that's a lot a lot closer than any other european market is to those previous peaks. >> yes, exactly. but going into 2013, actually, we have the technical strategies here. if you look back on 2012, the german stock market was one of the best performing stock markets. if we have learned something since the financial crisis began back in 2008, it is a reverting strategy has been one of the best plays.
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so we would like to see the contrarian best here buying the losers and selling the winners. so if everything goes right in 2013, then the peripheral european stock markets, that could be the winners and backs relatively not be a very good play. >> spain was the biggest underperformer, down, what, 4% last year. what needs to be in play for spain to be an outperformer? >> well, we need still tight budget controls from the industrial government in spain and a continuation of the reforms. we are beginning to see some signs now that the unit labor costs are getting under control. and they're declining in spain so their competitiveness is actually increasing and relative to germany inside the eurozone. so -- ask with the omt program, the ecb put, i would call it, in place. deals are still contracting in peripheral europe so that's easing the financing because of the peripheral government. and that makes the findings and
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costs coming closer to the nominate gdp growth. unless we hit an air pocket in 2013, just basically because investor res discounting a better future in '14 or '15, that could change the valuations of the european stock markets. so even though we don't see a change in the hard data. >> okay. and just look. you looked at the winners and losers over the course of the year. so some of the winners in u.s. and european stocks, bankaia, apollo group, sprint, expedia, would you on your mean reversion, it's not as simple as just taking the worst ten and the best ten and trading them the other way around, is it? >> i would separate those two things. our country's selection is more for the whole year 2013. the technical plays on the individual stocks is more
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short-term. that's over the next two, three months. so -- and the way we would do it is we would buy the losers and sell the winners from 2012. the five best and the five worst from the u.s. and european markets, we had ten stocks in both directions and neutralized adidas. so even though we might get a minor correction in the oil stock market in january or february here, we could still -- this kind of strategy would still perform well over these couple of months. that's a more short-term technical play than we would play. >> and what about technical terms of -- yeah, there still is demand for yield. is that still going to be a driver for stocks? so people are going to play cyclical? are they going to look for the dividend play? >> i think as i said, financing costs are coming down in the peripheral european bonds. and that makes a big difference because the financing costs are coming down.
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they're getting closer to the nominal gdp growth in these countries which has been a big issue for the last couple of years where this threat has been negative. and when you have financing costs below the normal gdp growth, you have an unsustainable long-term debt situation. so if we can get closer to the equilibrium in the debt space, that will spill into sentiment and the way investors are discounting the future in '14 and '15. as i said, you will probably see unemployment rates go up still in peripheral europe and hard data not perform very well. but it's a discounting of a range in '14 and '15 that could make all the difference in these stock markets. >> yeah, yeah. i was just wondering what was going on between -- if you had to look at the relationship between bonds and stocks. but give us a view on am here, the world's biggest stock. it's on a bit of a decline in the fourth quarter, up 3% yesterday. what happens now?
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>> well, we are pretty clear on apple. it's an undervalued stock here. we had a note out on december 12th where we said this correction was well overdone and based on the changes in the capital gains tax rate in the u.s. and the hedge fund that wanted to close on real life profit decision. we came out the 12th of december and said you should buy average into the stock over the december period. if you've done that, you would have probably come in around 520. it's now trading at 550. we would expect it to go to around 600. the product pipeline is still having some momentum and all the big active fund managers are still -- they know this so they have to add precisions in january and you have the earnings coming out in january 24th. and so we expect a run up in the stocks until this date. and if the numbers are better than expected as we expect, then we will probably see that and it's a good time to get out in
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late january. this is a very short-term play in apple. >> peter, thanks for that. are there any thoughts or comments, e-mail us and tweet me. over to the uk, uk lenders plan to significantly increase the number of loans available to house holds and companies in 2013. this is a bank of england survey that's just been published a few moments ago. the central bank's quarterly survey of credit conditions suggests made more home loans available to buyers and plan to increase the supply available for house purchase further in the first three months of the new year. they plan to make more loans available to the corporate sector following a rise in demand for loans from large mid sized firms, particularly in the fourth quarter of 2012. they say some of this because of the funding for loan schemes set up in part, set up by the
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bank of england. that is part of the reason for the increase. this comes as publish small businesses are expecting also a better start to 2013. profit is expected to rise. this is according to the lloyd's xhish business in britain survey. the report suggests concerns over the euro area are subsizing and exports for the area might bounce back. adam, happy new year. good to see you. >> happy new year to you, too. >> so look, it's a slightly positive tone. what is behind that? >> well, i think there's two main factors. and they've already alluded to one. it's clearly an improvement in sentiment in the eurozone. clearly, the eurozone is the export markets in the last two years has been fought with uncertainty. but over the last six months or so, we've seen clear signs of improvement. it does seem that both major res beginning to come through in improvement and export confidence now. >> although it wasn't there in
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the manufacturing pmi yesterday, right? we saw -- that improvement seems to be drawn by domestic rather than exports. >> yeah, that's true. but i think also, our surveys of 1800 companies both across the manufacturing and the service sectors. so we suspect the service sector companies in particular and the business services of the sector that's outperforming that are probably benefiting most from the improvements in the eurozone. but that said, i think there's a lot to be going for manufacturing companies, as well, assuming conditions in the eurozone do subside. then i would expect manufacturing exports to rise over the medium term. >> we've just seen the credit conditions report from the bank of england which suggests more demand for loans from the corporate sector following an increase from large and mid sized firms in 2012. how does that tally with what you're seeing in terms of i guess their investment plan? >> well, investments intentions in the business in britain
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survey are still fairly subdued. there has been some pick up, but understandably businesses are recei reticent. the volume starts to peck up in 2013, hopefully businesses will use that as an opportunity to start investing in plants and equipment and that should hopefully lay the foundation for a more sustainable recovery in 2014 and '15. >> regional is the improvement. >> yeah. london and the southeast still continue to lead the way. the west midlands was the underperformer in the business britain survey. but understandably, london is the heart of the services activity, the financial services, and confidence at the moment is coming from london and the southeast. over time, cyclical manufacturing conditions improvement, as well. we would expect that confidence
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to start spreading more diversely acourt reporter the uk as a whole. >> and one of the standouts, we've had a disconnect between different bits of data. what surprised many is how well employment has stood up in the uk. what are firms saying about their current hiring or staffing levels? >> stable. the net balance on employment conditions on the business in britain survey is pretty much unchanged from where it was six months ago. i guess it isn't that surprising. we've seen a fall in activity in the uk over the last year or so. and companies effectively have taken on quite a lot of labor. i think they're now pausing a little bit looking at what's happening with volatility rates and deciding this isn't a sign to be rehiring more and more labor. rather, they're going to wait for productively levels start to rise in 2014. so the labor market picture in 2013 is a little bit more subdued and indeed, we would expect overall employment and the unemployment rate to remain broadly unchange if not pick up a little bit in the first half.
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>> and i can't get away with asking you a bank of england question away from the report. do they hold their fire for a while now? do they keep qe where it is? >> we think for mow qe is unchanged. we have a change in the bank of england governor coming in the summer. indications are that he will be fairly aggressive in the policy measures he puts forward. whether it will be more qeo other forms of stimulus remain toes be seen. >> adam, thank you for that. now, around half the british depositors think the economy will grow this year. a survey by the institute of directors revealed that executives are growing increasingly quick. george osborne's improvement rating has fall ton just 11% down from a peak of 54% in 2011. something to ponder. still to come, we'll be in paris where reports are servicing francois ohland may have to abandon his tax rate.
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in k0r79 thus, next is up by
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2.12%. boosted by better holiday traffic in the unup from christmas. joining us for more is will hedden. trader at ig. we had a bullish update from john lewis yesterday. now neck, as well. what's the read through here? >> good morning, ross. i think the read through is that the bigger players on the high street continue to perform well, continue to attract the traffic both through foot fall and on line, as well. very prominent online offerings and this is what differentiates a lot of the larger companies from the retailers on the high street that obviously struggled throughout last year. >> and what are the indications on the early sales news? >> well, i think the indications are that the stocks have been surprisingly good despite the obvious issues with the uk economy. certainly what we see from neck is that they're seeing a continuation of the first three
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quarters of the year into the christmas period. perhaps not as bumpy as we saw for john lewis. but thanks to the other measures we've taken, they're pushing measures up. >> and a very strong move yesterday, which is a broad based move. the growth is underperforming. really not going with the rest of the market. what is the concern for them? >> they are losing ground to tesco. we're starting to see investors believing in the turn around story after the problems they had in the first half of last year. based on the training we saw throughout december, tesco is start to go become more favorable in investors. >> all right. and what happens now? a big move the first day of the year. first trading day of the year. and then what are your clients doing? what are they looking for now?
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>> initially on the back of that news yesterday, we're starting to see short money coming in. what we did notice in the run up to the new year, volumes which obviously have been lackluster, the whole of last year falling into christmas. not a lot of people wanting to be short in the fiscal cliff just on the off chance of having to do what they actually did happen and gave us a deal at the last minute. so today we started to see more shorts coming in. we're starting to see a buy perhaps around 80% shore on both the ftse and the dax. i think we're starting to see people looking to sell this market on the macro level. we're still seeing decent levels in terms of long positions and individual companies. >> can you defend 6,000? >> i think we could see the market go back below 6,000 before the end of the week. >> good to see you. thanks a lot for that. now, u.s. salvage crews invested a royal dutch shell last week. the theme says there's no evidence thus far of any
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environmental impact and it rig does not appear to be spilling fuel. german unemployment hovering near a post reunification low, despite rising in december. the number of those out of work hit 2.9 million. reuters poll showed economists have expected an increase of 10,000. and the car industry has added to the down beetle economic mood in the eurozone. auto sales in italy as a 33-year low in 2012 the. spanish sales down like 12% for the year. the picture in france similarly poor with new car registration slumping by 14%. the whole today of sales have come early to spain. thousands of shoppers retail buzz hunting yesterday. changes to legislation means january sales have been brought forward by five days this year, just in time for a gift-giving tradition on january the 5th.
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and france's anti-trust authority has rejected a proposed merger of illiad and vendi. it's been subject to intense competition. vivendi suggested in the future that the future of sfr may be contingent on merges or network sharing deals pt. and the french president francois hollande suggests he may have to come up with a plan b after the proposed 75% of top rate income tax was rejected by france's constitutional court. stephane is in paris for the first on "worldwide exchange" this year. nice to see you. so is there a plan b in the offering? what might he do to get around the constitutional court's objections? >> not that the media was aware of, but, obviously, the government will have to come
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back with a plan b. francois hollande stated a few days ago he would come back with a plan to tax the super rich in the country but will have to drop the 75% tax rate. but if you want the plan to be avoided a second time by the constitutional court. it was not the most important one from a budget point of view. if you look at the tax increase for this year in france, it's about 20 billion euros. and this 75% tax for the super rich people was establishmented to raise about 210 million euros, which means around 1% of the total tax hike for this year and it would have been implemented for only two years. but that was not the most important one. that being said because it's a symbol and because it's important, francois oh land will come back with a plan. but it will have to look
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carefully at what the constitutional court said last week. it has not been rejected for the 75% rate, but for technical reasons because it was targeting individuals and not house holds like is usually the case in the tax system. that being said, the court denied two plans that were between 68% and 82%. that means if the government comes back with a plan at 75% to tax the super rich people it may be rejected and that would be a real political embarrassment. probably yes the 75% will be dropped, but the super rich people won't win the battle because the government will be back. in the short-term, the super lisp will have some breathing space because the tax will be implemented on the revenue for 2013 and not 2012 like it was the original plan.
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but it will give them the time to go to belgium or the united kingdom. >> and not in the case of john jerea. does that mean we have to come out and deny that they have any plans to move? >> the fact that you say jean micheljarre shows that you are much younger than your earlier college. and apparently his company, jarre technology, which is selling very expensive dust covers for ipads, it will be quite a sector.
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and not because of the tax reasons. it's hard to believe. but you know, we had a similar story a few days ago. anne falue is going to move to london. also he said that was not for tax reasons. it's because his company has been bought by a foreign company and is moving to london to take care, to work on the north european project, as if he couldn't do it from paris. >> any more going to come out of the woodwork, stephane? >> i don't know. i will be the last one in this country. i will switch off the lights. >> in that case, then it will be a country that we'll want to come to. if you're there and no one else, we'll get on -- they might stop the train.
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>> now, turning our attention away from france back to the united states, president obama took a few minutes out for his invocation earlier today to sign the fiscal cliff deal. u.s. lawmakers will be back on capitol hill today as the 113th congress begins its first session. new members will be swarn in and party leaders will be re-elected. it's unlikely that house speaker john boehner or senate majority leader mitch mcconnell will lose their positions, although they've been criticized by the deal. several say they are frustrated by the outcome of washington's budget battle. while they're relieved lawmakers avoided tax hikes and spending cuts, they say the bill does not avoid the fiscal problems. meanwhile, the phrase "frk cliff" tops a michigan
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university's list of words to be banned. other phrases included yolo. i don't know what yolo is. bucket list is trending and they should get rid of kicking the can down the road, as well. i personally want to ban that from this channel completely. still to come, more on "worldwide exchange." we'll look ahead to the start of the u.s. trading day.
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this is "worldwide exchange." looking for an encore stateside, u.s. investors will start turning their attention away from the fiscal cliff to this week's economic data. and another shot in the arm for china's economic recovery. officials here put service sector growth at a four-month high in december, thanks to a boost in construction. >> you're watching "worldwide exchange." bringing you business news from around the globe. if you've just joined us this morning, a very warm welcome to the u.s., particularly stateside. this is where we stand after the bang of a performance on the first day of trading. the fass dak up 3, s&p up 3
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points. at the moment, the nasdaq is 3 points below fair value and the s&p 500 at the moment is some 3 1/2 points below fair value, as you can see. we are slightly lower. the ftse global 300 is down six points. here in europe, despite big gains, it's not been that marked. you can see that on the ftse is absolutely flat at the moment. offset by good sales numbers from retailer neck today. they say the christmas shopping season went well and the early season looks to be fairly strong. xetra dax down 18 points. worth pointing out the close yesterday only 4% from the record high that we set way back in 2007. that report high, 8,201. the spanish european markets
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today are down. the ftse mib in italy down .4%, as well. yields after falling yesterday, a little higher this morning. u.s. treasuries, a little low. gilt yields in the uk over 2%. so we're up at the high for about eight months in the uk. we've got a five-year auction coming up fairly shortly, as well. on the currency markets, aussie has maintained against the u.s. dollar. sterling/dollar, 1.6214. and the euro/dollar, below 1.32 at 1.3147. that's where we stand right now here in europe. let's recap the asian trading session. li sixuan is with us.
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>> hi, ross. the japanese and midland markets remain shut for the new year break. but china's latest services pmi for december came out a four-month high. this follows news earlier this week that put factory activity at a new high. the construction sector was a key driver for the pick up. the transportation services showed weakness due to still sluggish -- for china's exports. but on the whole, we have seen more signs that china's recovery is gaining transaction. also a slew of recent promising data when it opens tomorrow. asian markets finished in the green. the sang second add .4% today after surging nearly 3% yesterday. industrials and consumer goods outperformance. elsewhere, taiwan's tie yax gained for the fourth straight session. the south korean kospi saw some profit taking ending down .6%. automakers took a beating on
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weak sales outlook and also the strong currency. hyundai motors slipped close to 5%. australian miners continued to shine, pushing the asx 200 to end at a fresh 19-month high. this despite warnings on the current rally on iron ore prices won't have legs. india's sensex ended higher by .2%. >> thanks for that, sixuan. now let's remind you of what's on the agenda in the united states. the monthly challenges job cuts report is out at 7:30 eastern and it's followed by the december adp report at 8:15. forecast calling for an increase of 150,000 in private sector payrolls. at 8:30, we get weekly jobless claims expected to rise by 13,000 to a total of 363,000. and then at 2:00 p.m., the minutes from the last month's fed meeting get released. so a bit to focus on today away
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from politics. talking of which, president obama took a few minutes out from his hawaiian vacation earlier today to sign the fiscal cliff bill. u.s. lawmakers will be back on capitol hill today as the 130th congress begins its first session. new members will be sworn in and party leaders will be elected. it's unlikely that house speaker john boehner or the senate minority leader mitch mcconnell will lose their positions, although they have been criticized for the deal. several says they're frustrated by the outcome of washington's budget battle while they're relieved lawmakers did manage to avoid tax hikes and spending cuts. the honey well ceo david coda told "wall street journal" we shouldn't be sitting here slapping ourselves on the back for a great job. at the same time, moody's rating has warned the congress's budget deal may not go far enough to prepare a credit downgrade this year. the country's debt burden
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remains high and may not support a aaa rating without further deficit reduction. joining us for more, steven englanders. you're up bright and early. happy new year to you. good to see you. >> happy new year. >> quite a day for investors around the globe yesterday. where does that leave us this morning? >> well, you know, text markets can't go up every day. we had a pretty good rally coming in towards tend of the year and asset markets hit recent highs. you know, the fiscal issues are laid to bed for about six weeks and i think investors now are kind of accepting that the process is messy and that gets solved at the 11th hour. when they said they were going to keep rates low for a long
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time, you'll recall that some analysts interpretive thing was the beginning of the end of easing. i suspect it's not. so we'll get a better read this afternoon. >> yeah. when you say you suspect it's not, what's the next step? >> well, it means their commitment to get the u.s. economy growing faster. so i think the sense that the market had that somehow there was a hawkish tone to the minutes i think it will likely be dissipated. i think it will likely get the rally continuing and we'll get risk correlated policies continuing to rally. but the driver won't look at the issues of u.s. monetary policy. still, right? and these were the drivers, indeed, last year. so in that sense, not a lot has
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changed. >> no. you know, but i think that the markets sometimes is skeptical about the fed anticipates commitment to keep on course and the fed tends to back away quicker than they've been promising and that we would likely see from the minutes over the weekend we had janet yellen speaking at a number of evens on the west coast. the if i had fed is as committed as ever. it's enormous improvement in sentiment. so we're down to what, 14 or something around that level. 14.68. is that too complacent for you? >> well, i think that the markets for much of last your was looking for tail risks to
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become the dominant force in the market and the tail risks have largely dissipated. the europeans, they haven't solved their problems, but they've managed to stamp them down considerably. china was a big issue and that seems to be bouncing down. i think policymakers are much more committed to avoiding these tail risks and the markets have in the middle of last year. it does look positive for equity markets. >> and it could be a pretty intense discussion, to put it mildly. how is the market going to fair
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with that smp. >> when things are bad, the dollar appreciates. when things get better, as they have over the last couple of days, it tends to depreciate. if you look at the way currency is traded at the end of the laugh year when there were some fiscal concerns, they didn't sell off that much. until the evidence is very clear that things are going to fall aart, the market will presume that there will be a last-minute fix again. so the risk is on, i think, to continue. it's at risk if we hit a wall with the debt ceiling sequester. but i don't think that the market will start pricing in that wall very much in advance because history tells them that a fix is found. >> all right. we'll come back in a second. we'll look at some of the cross rates, as well, and get your thoughts on euro/dollar. meanwhile, still to come on the program, taking a look at the
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playstation fans listing up, sony could unveil the latest version of its public gaming console in february. the japanese electronics guide
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has stopped making older models. now it sets a precedent for february the 25th, which is called destination play station. even if a ps3 successor is on display, it's not expected to hit store shelves until 2014. elsewhere, the indian condmrom rat has more than 8 billion for investments over the next two years. he says he'll continue to have his push in emerging markets in latin, asia and latin america. investors awake for a new debt reality in washington. meanwhile, the focus turning to unemployment ahead of key u.s. jobs data. and the party conditions in hong kong after china's pmi points to solid growth.
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so for the currency markets today, dollar/yen down .3%. 87.80. euro/dollar, 1 .31 12 is where we stand at the moment. the pound is back against the greenback, 1.6212. steven frank is with us for more. are we going to break out of the euro/dollar range. we've been trending sort of at the high of 1.33. do we stay in the range for this quarter? >> i think so. i think the policies are oriented towards a risk positive sentiment, which supports the euro. i think that the reserve managers now that asia is picking up and asian reserve managers are finding themselves with more dollars in the reserves. inevitably, they'll have to buy some euros. but the down side of the euro is that it's a really mediocre
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economy. and it's hard to get excited about eurozone investments except in terms of convergence playes and so on. so i think the euro is going to have a hard time raking 1.35 and probably won't go below 1.25 over the next year. there are much more interesting currency toes trade. >> we'll get on to that. but the economy and asset markets, clearly the impact on german equities, up 29% last year. also, in europe, you've got yield plays, right? if you're buying italian debt, you're getting a really good yield play. is it such a disconnect between the fundamentals and sentiment and asset prices? >> well, except asset prices were largely driven last year by the fears that the eurozone was going to fall apart. now that, you know, some of those fears have been put to rest, at least in the short-term, investors are kind of buying back a bit of what
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they sold. so it doesn't mean that things are good. it just means that they're not as bad as they thought in the middle of the last year. but certainly the -- you know, over the medium term, the economies are very weak. the sort of convergent plays gives you one off gains. it doesn't give you permanent gains. and a lot of investors don't have the sdum for taking that kind of risk, which is largely political still. and would hesitate to come into that convergence trade. so i think the support is limited, given the economic backdrop. >> you mentioned there are our cross rates that are more interesting. does that include the aussie/dollar? the aussie has been sort of a play on china. what happens with that cross rate? >> well, we actually like it up. it's true it's expensive to buy hamburgers in australia. but with commodity prices
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finding support, and with equity markets strong and as you said, the vix being, you know, close to lows, those traditionally are very strong supports for the aussie/dollar. and those tend to dominate the kind of purchasing power parity type of negative for the aussie/dollar. and i think that, you know, going back to asia, markets were very, very pessimistic about china. middle of the year, third quarter of the last year, and i think they're buying back some of what they sold. >> yeah. shanghai, up 8% in the fourth quarter and only up 3% in the last year. so certainly a move back in there. stick around, steven. more to come from you. get a cup of coffee. the phrase fiscal cliff topping a michigan university's words to be banished for misuse, overuse and general uselessness. other phrases included yolo.
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if you know, let you know. you only live once. okay. yeah. it's rubbish. get rid of it. bucket list and trending. tell the folks on twitter that. we want to know what phrase would you like to kick off the cliff and never hear again? join the conversation, worldwide@cnbc.com. i personally want to get rid of -- i don't want anybody to say are you going to have to say it? i don't want any more cans being kicked. can i put it like that? no more cans kicking anywhere. still to come on the program, u.s. retailers closed the book on the holiday shopping season. when they report december sales today. will there be many happy returns when they tally up their receipts? plus, a reminder of where we trade here in europe. it's pretty even stevens between advancers and decliners,
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decliners just edging it at the moment.
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u.s. retailers reporting december same-store sales. the consensus forecast is for an increase of 1.9%. that would make it the worst december performance since 2008.
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consumers mood down from uncertainty over the fiscal cliff. i thought we were getting rid of that word, as well as the after of courses of the school shooting in connecticut. stacey is joining us. steven england st still with us, as well. good to see you, stacey. >> happy new year. >> would you concur with that analysis or not? >> we've heard the mastercard numbers out and they were up less than 1%. it looks likes it's going to be the toughest holiday season since 2008. i was in stores before christmas, and things were quiet, whether it was tiffany or saks. so i think expectations have come counsel significantly and you'll see some disappointing numbers. >> yeah. has much of this gone to online? >> sure. originally when we saw the traffic down in stores in the weeks going up into christmas, the blame game was wab it's just online. it's eating up a bigger share. but so far, the numbers we've
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seen are between 8% and 15% increase for online sales. that is not enough to make up for the traffic foot fall that we've seen in stores. >> what's interesting here in the uk when you talk about online, the two that we've heard from, john lewis and next are two stores that have figured out how to combine online with in stores. will it be the same story in the u.s.? if you crack that, you'll do much better than your competition? >> right, the right. john lewis has told us, almost a quarter of their sales are online. nordstrom, which reports comps today, is way ahead of the pack in terms of integrationing, j i online, in stores. macy's, as well. that makes a big difference as we go into 2013. >> k --
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>> kohl's is one of the retailers that is sort of stuck in the middle. also, their inventories were way too high going into holidays. they had a miss, a really big miss in november. for december, another miss may be o on the horizon. then talk about growth margins. >> who is able to -- is anybody able to improve margins? >> well, that's the problem. this year, we heard the story was all about lower input costs. inventories are in really tight shape this year, so everybody was looking for certainly better margins. but as we saw sales go slow towards christmas, retailers get nervous. therefore, they do markdowns. they want to gain share. they want to get you in the store. so that story this year probably isn't going to come to fruition. >> so lots of blame game, sandy. you know, the fiscal cliff
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issues. how does this set us up for q1. remember, we don't have any more snow from the states in november and it's unseasonably warm in early spring. i was out last year and it was gorgeous. >> t-shirt and bathing suit. >> what will comps be like as we get into this quarter? >> we have a disappointing holiday. last year, spring came in february. so retailers were able to sell spring merchandise, full price, very early on. so we have tough compares. and if we have a seasonally cold february, watch out. that's the issue here. >> right. it's going to be tough. >> sorry. i don't have any better news for you. >> that's all right. christmas is gone. >> do a sun dance for an early space. >> that would be nice. stacey thank you very much. we'll take a short break. still to come, today kicks off a big 48 hours of uk equity data.
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tomorrow's payrolls, we'll preview the numbers when we come back.
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this is "worldwide exchange." here are your headlines today the from around the world. equity markets pull back in 20-month highs. the relief rally looming over u.s. battling spending cuts and the debt ceiling. u.s. investors are turning their attention away from the fiscal cliff to this week's economic data. friday's jobs report. official pmi data puts service sector growth at a four-month high in december thanks to a boost in construction work. and you've just joined us this morning. a very warm welcome. what a bumper day we had for global investors yesterday. it's great if you're long on the market. the doe up 2.4%. the nasdaq up 3. the s&p 500 up 2.5.
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right now we are implied slightly weak e at the open. the dow implied down some 35 at the moment. s&p down 3 and the nasdaq down some 4 points. let's show you where we stand on the ftse global cnbc 300. just off ten points ahead of the u.s. open and after good gains yesterday, stock up 2% across the board setting up a 20-month high on average. not big losses. the ftse down 9%. the xetra dax closing yesterday, only 4% of the record high. that was 8,105 we hit in 2007. you can see not far away at 7,756. the ibex, mirroring its performance. but the focus today, certainly back on the economic data to some degree. december adp jobs data will be released at 8:15 eastern.
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a dow jones consensus forecast indicates 150,000 new private sector he positions will be created. tomorrow will be the main event. we've got the hors d'oeuvres today. the unemployment rate expected to hold steady at 7.7%. steve englander is still with us, ahead of strategy at citi. gentlemen, if we can part the politics for a moment and look at the fundamentals, it's now a central tenant of the fed. >> well, i think what investors are expecting is that we'll continue to see mediocre job growth, not terrible, but nothing that gets rid of the -- or regains the jobs that were lost in 2008/2009. so they're looking for 150,000. we're looking for 140,000. i think they would be a little
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bit shocked if it looked as if jobs were collapsing. there's no indication of that. positively surprised, you know, maybe above 170,000 would suggest that maybe the private sector momentum was stronger. but, you know, again, it's hard to tell the story that's really different than what we've seen the last six months. >> yeah. it's interesting to look at the u.s. economy. clearly one of the big positives is housing starts, suggesting that residential construction spending will start expanding. how much of a positive is that going to be? >> well, it's a positive, but the housing sector is a lot smaller than it used to be. so the bang that you get when you're starting from a base of 500,000 housing starts is a little different than when you see a million and a half. so it is a positive, but there's still headwind that's you're facing in state and local governments that will prevent the economy from booming or growing as fast as the feds would like and obviously as u.s.
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residents would like. >> yeah. so -- and all of this needs to -- i mean, the fed, as you were sucking earlier, there's not going to be any change really in the economic data that's going to change the position of the fed anytime soon, and that leads to support. >> yeah. i think that they see themselves as having -- you know, obviously there will be some fiscal contraction with the issues we've seen. they see themselves fighting these negative forces and trying to get the u.s. economy growing clearly above trend, which they haven't been able to so far and expecting that they'll have to continue to provide the support for a long time. >> how much do you -- >> i doubt the base -- >> how much do you think the minutes will show they were worried about going over the fiscal cliff? >> i think that they probably saw it as unlikely, but a major issue had they gone over. i think that there is always the feeling that the -- that they
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would find a resolution at the end. i think it was more contingent worry, but it's there. now they have about 1% to 1.5% fiscal drag next year that they'll be worrying about and that's for real. that's what monetary policy is aiming at getting even more growth on top of that. >> so we'll see how retrade through the employment report tomorrow. a final thought, this is a fascinating one. you want to go long the australian dollar against the swiss franc. just explain that. >> aussie, we talked about in terms of the asian growth and pick ups. the european story and the euro story, i think we're doing a story of economic weaken. i think with the reduction and
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tail risk, i think the euro could go up considerably higher than where it is now. above 125 to possibly 1.30. so the combination risk on in european tail risk diminishing, i think, you know, makes that to me a very interesting and compelling trade. >> it's an interesting idea. steven, thanks for joining us. we'll take a short break. still to come, we saw treasuries pushing their yields to three-month highs. we'll get a look in on that market when we come back in few moments' time.
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market euphoria wanes as realities hit the debt ceiling issues in washington. but the party continues in hong kong after china's services pm i points to solid growth. so the president took a few minutes out from his hawaiian vacation today to solve the
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fiscal cliff bill. u.s. lawmakers will be back on capitol hill pass 113th congress begins its new session. it's unlikely that house speaker john boehner or senate minority leader mitch mcconnell will lose their positions. once they're relieved, lawmakers did manage to avoid tax hikes and spending cuts. they say the deal doesn't solve the country's credit problem. brian ren roldz, happy new year. do you agree with that sentiment? >> thank you. same to you. yes. we're going to see now a series of episodes in washington. i've termed it like the penny
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arcade game whack-a-mole. and every time spiker john boehner tops up on tv, if there's an equity trader that wants to take the hammer and hammer stock prices back down, but at the end of the day, this washington drama is like a side show. stock prices will go up over time because we're in a credit boom. >> when you say we're in crate boom, just explain that. >> well, our nation's pension funds need to make 1% in a 7.5% world. in the summer of 2011, we got very little down and sock prices plummeted as inresters feared the worst. pension funds put more money to work.
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stocks soared. we felt on the tally, i said last month that the worst case for this negotiation would mean the same thing. stock prices might rise a little bit, but there's tons of cash from the corporate balance sheet. >> in q4, we did see losses. now they raised the losses on the first day of trade yesterday. it probably goes to to your point. what happens to volatility? we see a big drop in the vix, a historical drop, 35% in two sessions. is sentiment now -- are we now complacent? >> no, we're not too complacent at all. stock prices haven't done anything since the middle of september. we put in the hype of the bull market after qe launched was in
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september. we're only right back to that. the credit market has seen incredibility value. and a lot of that money goes for buybacks. but all other investors xwiefd besides company buy backs, we're net zero last year. even with that net selling, the s&p was up 0% year over year because of the buybacks. in 2013, the buybacks will grow more than they did in 2012. if we have only as much selling as we did last year, it could be a better year. >> right. well, pause there and we'll come back to you and is look ahead to the session today. brian, stick around. more to come from you. mean wile, moody's ratings agency has warned that congress's budget deal may not
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help prevent a downgrade. they told the journal that the company's debt remains high and may not support a credit rating after the ten-year deficit. we saw 10-year yields trading down. it was 1.76% in late monday trade. so what happens from here? lauren hensley from barclay's. i know you can give us a few, as well, lawrence. that moody's statement, is that going to cloes cloud treasuries a little bit more as we get into budget discussions, sequestration, debt ceilings? what happens? >> as you have been saying, the fiscal negotiations in u.s. are far from over.
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the first step is done, but the lowest common denominator was chosen by the congress here. that's unlikely to really fully put confidence from rating agencies at this stage. there's still the likelihood that moody's or on fitch downgrades the u.s. from here. is it going to be a big event, a big market defender? i don't think so necessarily. >> yes. because the rest of the world is still going to want to buy treasuries. are they? >> that's right, yeah. and not only that, but you have still a fairly modest growth outlook and you also have the prospects for quite a bit of fiscal consolidation in 2013. something around 1.5% of gdp. so that is what keeps growth modest. and the fed, by the way, is still buying a lot of treasuries, even if the rest of the world is not buying them.
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so we see yields staying up around -- and not rallying back from the top end of the range that they've reached recently. >> yeah. so what is the range that you think we stay in here? what's the top end in terms of yield and what is the bottom end? >> i think the top end is fully around here and the bottom end is probably like 1.5%, 1.6% on ten-year treasuries. it's been a fairly tight range by typical standards. on vix volatility, it was a bond market as it's very limited even if the number is firely stiet from what we see in actual terms. but gradually, as the fiscal console daugz kicks in, we might see a move back down 1.6 level. >> lawrence, thanks for that.
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other stories today, house speaker john boehner has scheduled two votes on a disaster aid package for victims on hurricane sandy. boehner took lots of heat from new york and new jersey who were furious when they didn't vote on the bill tomorrow. the second vote will be on january the 15th with the remaining monies left in the package. u.s. retail reports same-store sales today. the consensus forecast is for an increase of 1.9%. it would be the worst december performance since 2008. consumers mood dampened by concerns over the fiscal cliff as well as the after effects of the school shooting in newtown, connecticut, and hurricane sandy. also making the report december u.s. sales numbers today, prices up first, followed by ford, gm and toyota.
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it expects sales in the mid 15 million range, which could make december the best month of 2012 for the year. sales are expected at a rate of 14 r57%. the first time that happened since, get this, 1973. so are the good times going to roll again? on wall street after the 300 plus points rally on the dow. we'll preview the trading daed day ahead when we come back.
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changes are working on a filing to deal with the rules of
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the 2007 flash crash. the rules are set to go into effect next month. exchanges want extra time to test the new system and upgrade their technology. bank of america is reportedly ramping up corporate and mortgage lending after years of focusing on cost cutting and improving its capital position. the ceo brian moynihan has told the financial times the bank of america should surpass jpmorgan in direct to consumer mortgage lending in the next few months. he's directed banksers to be a more aggressive in lend to go businesses. bank of america was the better performer last year, up 109%. on the agenda today in the united states, we've got the monthly challenges job cuts reports out at 7:30 eastern. followed by the december adp report at 8:15 eastern. forecast there calling for an increase of 1r50,000 in private sector payrolls. that follows about 118,000 in
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november. and at 8:30, we get jobless weekly claims, expected to rise by 13,000, so a total of 363,000. and at 2:00, the minutes from last month's feed meeting are released. so plenty to get through before the start of trade today. that will probably be the main contributor. right now, as you can see, we are called a little bit lower as far as the u.s. stocks are concerned at the moment. the dow called some, what, 27 points below fair value. the nasdaq is about 3 points below fair value and the s&p 500, really, about three points below fair value at the moment. let's get a final thought here from brian reynolds, as well. brian, a big focus on employment. all this data today, the employment report tomorrow. how will that influence things or not? how will that swing sentiment? >> i don't think it's going to swing sentiment that much. remember, this is the slowest economic expansion since world
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war ii, but stock prices are up 100% from the lows in march of '09. in other words, financial markets have become increasingly divergent trt fundamentals. so it can make some headlines news. it can knock stocks down if we get a disappointing report because we're near resistance in the s&p 1460s. but after a week or two, it shouldn't have much of a lasting impact. >> with divergence from the fundamentals because of the -- also because of central bank action, as well, right? and now that providing inflation doesn't go higher, to 2.5% or so. is that how we should use the jobs picture in terms of how it impacts the fed? >> pretty much. but the fed, again, is just a tailwind for this. the big action, the real money flows that have driven this credit boom are coming from our nation's pension funds,
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endowments, foundationes and insurance companies. next week starts the annual surge in corporate bond issuance that we see every january. to me, that's going to be much more important than the payroll numbers. and what this week's action in washington does -- has done, they didn't do very much in washington, but it was much better than the worst case scenario. that means that the surge in corporate bond issuance that's slated to start next week, it's going to away terrific success. it's going to put a mountain of cash under corporate balance sheets and that money is veblgly going to go to buybacks to lift share prices. that's the big thing i'm watching next year is the amount of sharing bond increases. >> why are companies doing that instead of putting it to work. but it would be nice for everybody else if they actually put it to work. >> well, that's been one of the key hallmarks of this bull
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market and also the last bull market, as well. economic growth in both bull markets was so slow that companies didn't really see any gain to putting more investments into plant equipment and hiring. they generally only do that when they feel they can make more money than they invest. and with economic growth being so sluggish, they don't see those opportunities. instead, most ceos, a big portion of their pay is determined by the share price. so if ceos are incented to do what they're doing to get the share price up, they now have almost unlimited amounts of other people's money pouring into shared treasuries. though it's kind of like the shell game. at the end of the day, this is a credit cycle. it's going to send and it's going to end badly. but with new money coming into the pension fund, it probably doesn't end for two years.
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>> thanks for joining us. brian reynolds, chief market strategist as rosenblatt securities. a little earlier, we asked you which phrases you would like to kick off the cliff and never hear again. dave said please tell everyone to stop saying long in the tooth. martin said i agree with you and uk should it not be pin? yes, it should. cathy said stop saying "ws. those are acronyms. you have a profitable day. "worldwide exchange" exchange returns tomorrow.
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